Sydney, Melbourne office rents set to rise in 2018: JLL

Sydney, Melbourne office rents set to rise in 2018: JLL

Rents for office space in Sydney and Melbourne will continue to rise in 2018, as a result of the “tightest vacancy rates in the world”, reports The Australian.

Research by professional services firm JLL reveals that during 2017 the national office vacancy rate shrank 1.5 per cent to 10.4 per cent.

Melbourne recorded the strongest results for the take up of office space, as the vacancy rate sank to 6.4 per cent—its lowest level since 2012.

JLL Head of Office Leasing Australia, Tim O’Connor said the education sector was leading the charge in Melbourne.

“The public sector is also in expansion mode, technology related firms are increasing headcount while centralisation activity continues to support net absorption figures,” Mr O’Connor said.

Sydney’s CBD office vacancy rate compressed to 5.1 per cent in 2017, the lowest in almost a decade, notes JLL.

Brisbane, Adelaide, and Perth also saw declines in available office space on the back of improving economic conditions and rising confidence about the job market.

The AFR reports Canberra was the only market to record a rising CBD office vacancy rate, which hit 13.3 per cent in the December quarter. Nevertheless, prime grade vacancy remained tight at 5.6 per cent with rents up 4.3 per cent in 2017.

“The market fundamentals in Sydney and Melbourne are still quite strong and when you benchmark them in a global context, vacancy rates in Sydney and Melbourne are tighter than any market you’d see in the US, and typically a lot tighter than European markets,” JLL Head of Research Andrew Ballantyne said.

“That will continue to attract attention from global investors.”

Rental rates in those cities were likely to grow at seven or eight per cent in 2018, down from the 2017 highs of 12 to 20 per cent, he said.

Mr O’Connor is quick to add, though, that premium office rents in Sydney are more affordable than those in its global counterparts, and among the lowest in the Asia Pacific region.

According to the JLL Global Premium Office Rent Tracker’ (PORT), Sydney’s rents were significantly lower, at US$74 per square foot a year, than the Asia Pacific average of US$111. By contrast, Hong Kong had the most expensive premium office rents at $323 per square foot per year.

According to Mr O’Connor Sydney’s ranking reflected opportunities for investors in a market often mistaken as expensive and unaffordable for some tenants and that, “the city’s premium office rental costs align with other world hubs such as Frankfurt, Chicago, Zurich and Los Angeles, making it a significantly inexpensive, and smart, option for multi-national organisations in the Asia Pacific region.”